Last quarter’s increased demand for mortgages is expected to remain solid, according to a survey by the Bank of England released this morning. Stricter controls decreased mortgage lending over the past year, however banks reported the strongest demand for mortgages since 2013 in the second quarter. The central bank’s quarterly Credit Conditions Survey also showed demand for loans from small and big businesses increased and was expected to continue to rise. The survey also showed that corporate lending has changed little over the past three months, whereas demand for lending for small businesses has hit its highest level for a year.

There could be no other outcome. The measures offered to Greece had to belittle their government in such as a way that other radical European parties would be deterred from embarking on such horse play Tsipras and Syriza had subjected the Troika to over the last six months. The terms of the latest deal will mean years of harsh austerity in Greece in an agreement that many commentators said were designed to cause a voluntary Grexit. After snubbing previous proposals from its creditors, the ‘last stand’ talks last night had to be incredibly harsh to prevent other Eurozone nations adopting a path that could again question the authority of the Germans and cast a shadow of doubt over their ability to keep the rest of Europe in line. Spanish Prime Minister Rajoy is likely to lose elections later this year and could be replaced by a radical government that shares the same ideology as Syriza. Greece’s share of Eurozone is miniscule compared to that of Spain and a similar debacle in the Iberian Peninsula would rock not only the Eurozone, but the global economy. This would have been at the heart of the decision making process of last night’s talks and it was imperative that Merkel showed that there would be zero tolerance on radial leftist parties trying their luck with major European institutions. Although they have remained in the Euro for now, it will be of little comfort to the Greek people have years of austerity to look forward to.

Talks over Greece have ended with an announcement from German Chancellor Merkel that a deal has been struck after Sunday’s talks went late into the night. The deal has sparked furious protests in Athens as the terms of the deal are seen as complete compitulation by Tsipras who had been campaigning for a no vote against austerity. The votes of 61% of the Greek people have been totally disregarded as Tsipras agreed to harsh austerity measures being implemented by this Wednesday. European equities rallied in the wake of the announcement building on strong gains last week. The terms will have to be formally accepted by all parties, but Tsipras says the deal has averted a meltdown of the Greek banking system. The terms of the deal include the establishment of a EUR 50 billion fund to hold Greek assets that will be used to repay creditors. EUR 25 billion will be given to Greece to recapitalise it’s banks who have suffered months of capital outflows. There will another Eurogroup meeting this afternoon to discuss bridge financing.            

Greece have made a huge U-turn and presented it’s creditors with a proposal that goes against everything the Greek people voted for in last Sunday’s referendum. In a proposal, very similar to one put forward by the EU Commission a couple weeks ago, Tsipras lays out plans to reform pensions, increase VAT, increase tax on shipping and many more austere measures Tsipras had been campaigning against. The Greeks are hoping the proposals will secure a EUR 53.5 billion aid package that will enable the maintenance of current debts. Markets cheered the changes made by Greece and many investment bank analysts said it dramatically reduced the chance of a Grexit. The German DAX opened 2.3% higher and the Euro rallied against other major currencies. The proposal was submitted last night and the EU Summit will decide whether the Greeks have gone far enough this Sunday. Below you will find key extracts from the proposal text: Budget Adopt effective as of July 1, 2015 a supplementary 2015 budget and a 2016–19 medium-term fiscal strategy, supported by a sizable and credible package of measures. The new fiscal path is premised on a primary surplus target of (1, 2, 3), and 3.5 percent of GDP in 2015, 2016, 2017 and 2018. The package includes VAT reforms (2), other tax policy measures (3), pension reforms (4), public administration reforms (5), reforms addressing shortfalls in tax collection enforcement (6), and other parametric measures as specified below.   VAT Reform Adopt legislation to reform the VAT system that will be effective as of July 1, 2015. The reform will target a net revenue gain of 1 percent of GDP on an annual basis from parametric changes. The new VAT system will: (i) unify the rates at a standard 23 percent rate, which will include restaurants and catering, and a reduced 13 percent rate for basic food, energy, hotels, and water (excluding sewage), and a super-reduced rate of 6 percent for pharmaceuticals, books, and theater; (ii) streamline exemptions to broaden the base and raise the tax on insurance; and (iii) Eliminate discounts on islands, starting with the islands with higher incomes and which are the most popular tourist destinations, except the most remote ones. This will be completed by end-2016, as appropriate and targeted fiscally neutral measures to compensate those inhabitants that are most in need are determined. The new VAT rates on hotels and islands will be implemented from October 2015.     Pension Reforms: Create strong disincentives to early retirement, including the adjustment of early retirement penalties, and through a gradual elimination of grandfathering to statutory retirement age and early retirement pathways progressively adapting to the limit of statutory retirement age of 67 years, or 62 and 40 years of contributions by 2022, applicable for all those retiring (except arduous professions, and mothers with children with disability) with immediate application; Gradually phase out the solidarity grant (EKAS) for all pensioners by end-December 2019. This shall be legislated immediately and shall start as regards the top 20% of beneficiaries in March 2016 with the modalities of the phase out to be agreed with the institutions; Fiscal Measures Adopt legislation to:

• close possibilities for income tax avoidance (e.g., tighten the definition of farmers), take measures to increase the corporate income tax in 2015 and require 100 percent advance payments for corporate income and gradually for individual business income tax by 2017; phase out the preferential tax treatment of farmers in the income tax code by 2017; raise the solidarity surcharge;
• abolish subsidies for excise on diesel oil for farmers and better target eligibility to halve heating oil subsidies expenditure in the budget 2016;
• in view of any revision of the zonal property values, adjust the property tax rates if necessary to safeguard the 2015 and 2016 property tax revenues at €2.65 billion and adjust the alternative minimum personal income taxation.
• eliminate the cross-border withholding tax introduced by the installments act (law XXXX/2015) and reverse the recent amendments to the ITC in the public administration act (law XXXX/2015), including the special treatment of agricultural income.
• adopt outstanding reforms on the codes on income tax, and tax procedures: introduce a new Criminal Law on Tax Evasion and Fraud to amend the Special Penal Law 2523/1997 and any other relevant legislation, and replace Article 55, ¶s 1 and 2, of the TPC, with a view, inter alia, to modernize and broaden the definition of tax fraud and evasion to all taxes; abolish all Code of Book and Records fines, including those levied under law 2523/1997 develop the tax framework for collective investment vehicles and their participants consistently with the ITC and in line with best practices in the EU.
• adopt legislation to upgrade the organic budget law to: (i) introduce a framework for independent agencies; (ii) phase out ex-ante audits of the Hellenic Court of Auditors and account officers (ypologos); (iii) give GDFSs exclusive financial service capacity and GAO powers to oversee public sector finances; and (iv) phase out fiscal audit offices by January 2017.
• increase the rate of the tonnage tax and phase out special tax treatments of the shipping industry.

Public Administration, Justice and Anti Corruption Reform the unified wage grid, effective 1 January, 2016, setting the key parameters in a fiscally neutral manner and consistent with the agreed wage bill targets and with comprehensive application across the public sector, including decompressing the wage distribution across the wage spectrumin connection with the skill, performance and responsibility of staff. (The authorities will also adopt legislation to rationalise the specialised wage grids, by end-November 2015);